Hedge funds: Opportunity aplenty after the turmoil
A return of normal attrition rates does not spell the end for hedge funds and many will profit from market dislocations, says Neil Wilson, editorial director at HedgeFund Intelligence.
It’s been a crazy few weeks over the summer, with hedge funds seldom far from the headlines. And by some accounts, the industry could be facing further big losses – with various pundits arguing that redemptions from investors could spark a further wave of deleveraging that can only further roil the turbulent markets.
Almost ever since we launched EuroHedge in January 1999, doomsayers have been predicting that the boom in hedge funds would be followed by an inevitable bust – and they have been wrong so many times before that it is tempting to simply dismiss this latest speculation as yet more wild scaremongering. However, with the credit crunch biting so hard that banks have apparently become reluctant even to lend to each other, there is perhaps more genuine concern than at any time since the tumultuous near-collapse of Long-Term Capital Management in 1998.
Some big hedge funds have indeed already been victims of the credit market dislocations, including two Bear Stearns structured credit funds – which had combined assets of some $1.5